National Association of Home Builders Discusses Economics and Housing Policy

CPI Growth Slows in September

Headline inflation rose slower in September relative to August, while core inflation was unchanged.

The Consumer Price Index (CPI), reported by the Bureau of Labor Statistics (BLS), rose by 0.1% on a seasonally adjusted basis in September, slower than the 0.2% increase in August. The “core” CPI, which excludes the volatile food and energy components, increased by 0.1% in September, the same increase as in August. Over the past twelve months, on a not seasonally adjusted basis, the CPI rose by 2.3% and the “core” CPI increased by 2.2%.

In September, increases in indexes for shelter (0.2%), apparel (0.9%), medical care services (0.2%), recreation (0.3%) and communication (0.2%) contributed to the increase in the “core” CPI. Meanwhile, the price index for a broad set of energy sources decreased by 0.5%, after the 1.9% increase in August. The food index was unchanged in September. Given the unchanged food index, the decrease in energy prices mainly accounted for the gap between headline inflation and core inflation.

NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components).

In September, the increase in the Real Rent Index slowed. The monthly growth rate of the Real Rent Index declined from 0.3% in August to 0.1%. In the first nine months of 2018, the monthly growth rate of the Real Rent Index was 0.1% on average, slower than the average of 0.2% in 2017.